Small Business Taxes & ManagementTM--Copyright 2009, A/N Group, Inc.
Introduction
We've reproduced below some of the more significant IRS statistics on audits, enforcement, etc. Most of the data is self-explanatory, Of particular interest is the fact that while the total number of audits of individuals is up only slightly, audits of taxpayers with income of $1 million or more increased significantly in FY 2009 from 2008. Based on the numbers, your chance of being audited if your income is $1 million or more was 6.42% for fiscal year 2009. Total audits of individual taxpayers with income of $200,000 or more has increased significantly in the last few years. The percentage of taxpayers audited with income of $200,000 or more has increased to 2.89% in fiscal year 2009 from 2.57% in 2006.
If you filed an S corporation return, your chance of getting audited in fiscal year 2009 was a mere 0.4%; for partnerships it was 0.38%. Again, while the number of audits has increased significantly (some 40% from 2005 to 2009 for S corporations), the percent audited has not increased nearly as much.
Keep in mind that statistics are just that. Your chances of getting audited depend not only on your income level, but also on what's on your return. An outsized deduction for mortgage with relatively low adjusted gross income could trigger an audit, no matter what your income level.
In the tables below, Field represents a field audit (e.g., the IRS has face-to-face contact with the taxpayer; Correspondence represents an audit where the IRS simply writes the taxpayer asking for more information. Coverage is the percent of filed returns that are audited. CY stands for calendar year; FY for fiscal year. For the complete report including footnotes for the tables, go to www.irs.gov/newsroom/article/0,,id=217442,00.html.
Enforcement Revenue Collected
(Dollars in Billions) FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Collection $26.6 $28.2 $31.8 $31.1 $26.9
Examination $17.7 $17.2 $23.5 $20.6 $17.4
Document Matching $3.1 $3.3 $3.9 $4.7 $4.6
Total $47.3 $48.7 $59.2 $56.4 $48.9
Staffing for Key Enforcement Occupations
FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Revenue Officers 5,249 5,627 5,662 5,492 5,451
Revenue Agents 12,192 12,778 12,816 12,599 12,958
Special Agents 2,771 2,780 2,709 2,631 2,650
Total 20,211 21,185 21,187 20,722 21,059
Total Individual ReturnsIndividual Return Closures and Coverage Rates
FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Field 247,235 302,785 311,339 310,429 326,249
Correspondence 968,073 981,165 1,073,224 1,081,152 1,099,639
Total
Examinations 1,215,308 1,283,950 1,384,563 1,391,581 1,425,888
Coverage 0.93% 0.97% 1.03% 1.01% 1.03%
Income Under $200,000
FY 2006 FY 2007 FY 2008 FY2009
Field 266,726 267,699 256,854 269,865
Correspondence 929,666 1,011,315 1,003,976 1,010,870
Total Examinations 1,196,392 1,279,014 1,260,830 1,280,735
Coverage 0.93% 0.98% 0.95% 0.96%
Income $200,000 and Higher
FY 2006 FY 2007 FY 2008 FY2009
Field 36,059 43,640 53,575 56,384
Correspondence 51,499 61,909 77,176 88,769
Total Examinations 87,558 105,549 130,751 145,153
Coverage 2.57% 2.68% 2.94% 2.89%
Income $1 Million and Higher
FY 2006 FY 2007 FY 2008 FY 2009
Field 9,459 12,259 12,233 15,730
Correspondence 4,728 10,941 9,641 12,619
Total Examinations 14,187 23,200 21,874 28,349
Coverage 5.25% 6.84% 5.57% 6.42%
Business Return Closures and Coverage Rates
FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Total Returns Examined 47,593 52,149 59,516 59,823 58,144
Returns Filed Prior CY 8,373,880 8,722,410 9,072,828 9,530,662 9,951,648
Coverage 0.57% 0.60% 0.66% 0.63% 0.58%
Small Corporation Returns
(Assets Under $10 Million) FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Returns Examined 17,858 17,849 20,020 20,580 18298
Returns Filed Prior CY 2,249,416 2,230,024 2,171,144 2,166,197 2,146,400
Coverage 0.79% 0.80% 0.92% 0.95% 0.85%
Large Corporation Returns
(Assets $10 Mil. and Higher) FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Returns Examined 10,829 10,578 9,644 9,406 9,536
Returns Filed in Prior CY 54,091 56,847 57,357 61,641 65,546
Coverage 20.0% 18.6% 16.8% 15.26% 14.55%
Subchapter S Returns FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Returns Examined 10,417 13,970 17,657 16,634 17455
Returns Filed in Prior CY 3,523,934 3,715,249 3,909,730 4,155,830 4,390,857
Coverage 0.30% 0.38% 0.45% 0.40% 0.40%
Partnership Returns FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Returns Examined 8,489 9,752 12,195 13,203 12855
Returns Filed in Prior CY 2,546,439 2,720,290 2,934,597 3,146,994 3,348,845
Coverage 0.33% 0.36% 0.42% 0.42% 0.38%
Enforcement Actions-Collection
FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 Levies 2,743,577 3,742,276 3,757,190 2,631,038 3,478,181 Liens 522,887 629,813 683,659 768,168 965,618 Seizures 512 590 676 610 581
Prosecutions Recommended, Conviction Rate and SentenceCriminal Investigations
By Source FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Tax and Tax Related 1,434 1,343 1423 1293 1269
Nontax (illegal) 658 756 866 804 769
Narcotics 767 621 548 688 532
Total 2,859 2,720 2837 2785 2570
Overall Conviction Rate 91.2% 91.5% 90.20% 92.30% 87.20%
Average Sentence (months) 22 22 22 24 24
Copyright 2009 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536
--Last Update 12/23/09